Getting Off The Ground – Your Small Business Financing Options

Small Business Financing

Getting a new business off the ground can be tough, which is why small business financing is a vital aspect in starting a new business. It is the means through which business owners can obtain the money necessary to finance a newly opened or newly bought business. Business owners have a wide selection of choices of small business loans and can choose small business invoice factoring.Each choice has its own set of pros and cons. Small businesses run the risk of closing down operations before they hit the five year mark, so choosing the best financing option is of great importance.

SBA Loans

The Small Business Association (SBA) is one place you can go to for financing. The SBA offers different kinds of small business loans that can be extremely helpful and beneficial in the long run, though it does not offer small business factoring. It does not provide the funds itself; the SBA goes to different lending companies and institutions on your behalf, thus reducing your liability. To get an SBA loan, you secure the amount you borrow with a collateral. You can later pay your debt with interest. Keep in mind that you need good credit to be eligible for a loan.

504 Loans

This is suitable for business owners who are looking to buy or invest in some real estate. 504 loans have a higher borrowing limit reaching $13 million, higher than other programs and small business factoring, and lower interest rates at 3% to 5%. However, the SBA tends to be more careful and selective of who qualifies for a 504 loan. For small business loans guaranteed approval,your business will be evaluated based on SBA rules and guidelines, and you will be required to put down a down payment of 10%. You as the owner must occupy at least 50% of the property.

CAPLines Loans

CAPLines loans are perfect for business owners that need some liquidity in the future. This option has a maximum limit of $5 million, with an interest rate of of 6% to 8%, much like 7a loans. However, unlike 7a loans, the interests of CAPLines loans are applicable only to the amount used. The thing to consider, though, is that CAPLines loans require collateral for small business loans guaranteed approval, which might make getting a CAPLine loan a little difficult if your assets are already tied as complementary products with the SBA..

7a Small Business Loans

Applying for these small business financing loans is very common among small business and startup owners. The funds from these loans can be used for a lot of things, commonly the purchase of necessary equipment. The maximum limit of 7a small business loans is $5 million, with an interest rate ranging from 6% to 8%. It’s a good option for first-timers, though it requires borrowers to have a credit score of over 670 and a 10% downpayment. Applications also might not be processed immediately.

Microloan Program

A microloan program can be a fallback for those who were deemed not eligible for 7a loans or those who don’t really need small business factoring. However, the amount you borrow in a microloan program has a maximum limit of only $50,000, which can only be used as working capital and cannot be used to buy real estate. A microloan can be great if you’re simply looking to purchase a piece of equipment or two. You won’t have to contend with strict criteria in order to be eligible for a microloan, but you will have to put down a collateral for small business loans guaranteed approval.

Non-SBA Loans

Of course, you have the choice of loans and financing from other organizations and institutions besides the SBA. If you don’t qualify for any of the aforementioned small business loans, or if they don’t really fit your needs, you can look into borrowing from banks, lending institutions, and small business invoice factoring. When you look outside the SBA, you’ll have a wider selection of financing options with a variety of requirements and limits. You’re bound to find something if you look hard and wide enough.

Working Capital Loans

A working capital loan is meant to cover a business’s everyday operations, like wages and accounts payable. It is not meant to be used to buy investments or similar assets. However, a working capital loan is great for businesses with cyclical sales cycles that have periods of reduced business activity. It can usually be processed quickly and may not require a collateral for small business loans guaranteed approval if your business has a high credit score. Keep in mind, though, that working capital loan interests are usually quite high.

Merchant Cash Advance

When you have a retailing business or any business that has particularly high credit card sales, there’s a bigger possibility that you’ll eventually experience a liquidity crunch. A merchant cash advance is kind of similar to small business invoice factoring in that business can be able to solve liquidity problems by borrowing an amount equivalent to what your customer owes you. A merchant cash advance, however, will require a percentage of future credit card sales within a specific amount of time.

Gender Based Loans

Banks, lending institutions, and the SBA have come up with small business financing programs made specifically for women who are opening or investing in a new business. You will have a choice of loan programs even when your credit score is under 600 and if your business is already established or at least a year old. It’s a good idea to do some research on the resources available to you in your area. Chances are, you’ll find small business loans geared specifically towards women in business.

Small Business Invoice Factoring

If you’re not too keen on getting a loan from a bank, small business factoring is a great option for you. Small businesses can benefit greatly from invoice factoring because it converts your receivables to immediate cash, thus allowing customers to make credit purchases without your business suffering the burden of a cash flow problem. Small business invoice factoring usually has reasonable interest rates and keeps your balance sheets pristine. If you and your customers have good credit ratings, invoice factoring can be a great option for small business financing.